How to Protect Your Margins & Grow Your Business in a Cost Inflationary Environment
Everyone is beginning to feel the pressure of an increase in VAT, petrol levy, and other price increases. Rising costs will start to eat away at your business margins. How can you protect these, as you grow your business? Customers won’t tolerate price increases, suppliers are going to pass on their increases to you, and your team will expect an annual salary increase too. Where to next, business owners? On The Money Show with Bruce Whitfield, Pavlo Phitidis outlines where you can cut back:
Your survival strategy
The best way to survive a cost inflationary environment, and continue to grow your business, is to: accommodate your customers, be tough on your suppliers, and assess your operating costs. Don’t feel tempted towards cutting down on your staff - it’s expensive to find, train, and replace critical staff members. Where skills are crucial, and they’re adaptive, it’s vital to hold on to the right people, so you can continue to grow your business. It’s time to assess and re-design your business, bringing down your operating costs, so you can protect – or grow – your margins:
The more efficient your business is, the less time it needs to get things done, and that’ll help you keep operating costs down. Work with your team to find new, streamlined ways to get things done. Time is money - cutting down on the time you need to get things done, will increase productivity and help you to grow your business.
Once you’ve re-shaped your business systems, consider deploying software that can make your business more efficient. Technology moves quickly, so assess just how useful your technology solutions are. At the bare minimum, you must revisit any system or software that’s more than 18 months old. Consider the following:
- Competition: Are there new solutions out there, that are cheaper, quicker, or better?
- Value: Are there alternative options that offer you a more valuable experience? For example, does your accounting software seamlessly link your bank account? Since Aurik switched to accounting software that’s simpler, mobile-first, and accessible anywhere, we’ve saved more than R180 000 a year.
- Platform: Many technology solutions offer a full platform, or ecosystem functionality, that operate around a core service. They can cater for a range of business operations, including sales, supply management, inventory, and more. Using a platform service may help you cut down on costs, so you can grow your business.
- The Cloud: Reduce the maintenance and risk costs associated with clunky hardware and big server rooms, by moving systems to the cloud, and you’ll find it easier to maintain and access, no matter where you need to be.
- Your Bandwidth Solution: Ditch the ancient ADSL and find an open-ended fibre contract option. It’ll provide you with better connectivity, for far cheaper. Better connectivity also creates opportunities for more online meetings, using Skype and similar technologies. That can help to cut down on travel costs too.
Relook at your accommodation and workstation solutions
You may not need all that office space. If you’re only using the boardroom once a month, it’s time to let it go. Look at pay-as-you-use shared office solutions, to cut down on your costs. Alternatively, consider ways you can make your office and furniture more portable, as this will create flexibility. A flexible workforce, that can work anywhere, will help you to cut down on operating costs, and continue to grow your business.
Re-evaluate your risk management and costs
Assessing your insurance needs, coverage, and costs, every year. Your business environment is constantly changing, and your insurance should too. Is your business adequately covered for cybercrime? Could you be paying less insurance, and get more coverage through a new provider? Now’s the time to assess, and ensure you’re getting the best possible deal.
Revisit your funding model
Every business has a funding model and, as you grow your business, you should reconfigure this every year. Is it possible to consolidate your debt and pay it off more quickly, or with less interest? Are there cheaper ways for you to access funding, so you can continue to grow your business, without impinging upon your margins?
Outsource what you don’t need to do
Tasks and duties that don’t need to be managed in-house can, and should be, outsourced. Using these types of solutions can help you to cut back on operational costs and make your business more efficient.
Margin and profit are two different things and, when you want to grow your business, you need free cash. Look towards closing, or creating, volume-based deals, where your margins are smaller, but the amount of profit generated increases. This will help you to grow your business.
At Aurik, we help you grow your business into an asset of value. We’ll help you assess and define your operations, so you can keep your business growing.